The week after the Good Friday and Easter holidays provided traders with several clues about the state of the market. Perhaps the most important clue came on Wednesday when Consumer Price Index (CPI) data was released. It showed that inflation had slowed to 5 percent on an annual basis, which is down from an annual rate of 6 percent in March. In addition, the monthly CPI figure was down1 percent, which was lower than the expected increase of .2 percent.
However, core CPI increased by .4 percent, which means that inflationary pressures may remain even as prices continue to stabilize. The Core CPI figure is generally given more weight by investors and policymakers alike. This is because it ignores food and energy prices that tend to be extremely volatile and may create a distorted picture of current economic conditions.
On Thursday, the Bureau of Labor Statistics (BLS) released its Producer Price Index (PPI). It showed a drop of .5 percent in prices for finished goods and services during the month of March after prices were unchanged in February. Furthermore, unemployment claims rose from 228,000 in the final week of March to 239,000 in the first week of April.
On Friday, monthly core retail sales and overall retail sales figures were released at 8:30 a.m. In March, overall retail sales dropped by 1 percent, which was steeper than the .4 percent drop expected by analysts prior to the report’s release. Core retail sales dropped .8 percent during that same time period compared to an estimated contraction of .4 percent.
Consumer sentiment and inflation expectation reports were released Friday morning. The University of Michigan sentiment index came in at 63.5, which means that consumers are generally upbeat about the state of the economy. This figure beat a consensus estimate of 62 and was slightly higher than figures released in the second half of March.
It was also revealed that consumers expect the inflation rate to be about 4.6 percent over the next 12 months. This is a .8 percent increase since the previous month and is the highest figure since December 2022 when consumers also expected inflation to be at 4.6 percent throughout 2023.
The data points will likely have a significant impact on the Federal Reserve’s policy regarding interest rates. On Wednesday, notes from the Federal Open Market Committee (FOMC) March meeting were made available to the public. During that meeting, the federal funds rate was raised by 25 basis points to roughly 5 percent.
However, according to the FOMC minutes release, there were discussions about a potential rate hike of 50 basis points. These talks were ultimately shelved because of issues with Silicon Valley Bank (SVB) and Credit Suisse. According to the FOMC minutes, it is believed that issues within the banking sector will result in increased lending standards that will likely have disinflationary consequences.
By Friday, the S&P 500 reached a high of 4,161, which represented a gain of about 1 percent for the week. The Dow reached a high of 34,023 on Thursday and finished the week up roughly 1.2 percent. Finally, the NASDAQ was up about .9 percent for the week after hitting a high of 12,191 on Friday morning. This year the NASDAQ has now gained 16.72 percent, the Dow is up 2.26 percent and the S&P 500 has increased 8.2 percent.
Those who own shares in bank stocks were among the biggest winners this week as JPMorgan Chase saw its share price rise by almost 7 percent on Friday to $138.03 a share. In addition, Citigroup shares experienced a rise of more than 4 percent Friday to $49.49. World Wrestling Entertainment (WWE) saw its share price go up by 2.3 percent to over $103 this week and has risen by more than 20 percent since April 2. That was the day that the company announced that it would be acquired by Endeavor, which is the parent company of the Ultimate Fighting Championship (UFC).